2020/11/25 by Eckhard Platen, Platen, Eckhard, Stefan Tappe +1
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #FOS: Economics and business #FOS: Mathematics #Insurance and Financial Risk Management #Mathematical Finance (q-fin.MF) #Probability (math.PR)
paper · doi:10.48550/arxiv.2011.12523
openalex publication_date 2020/11/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial services providers that are allowed to go short and those without short sales. The privilege to be allowed to short sell gives access to potential arbitrage opportunities, which creates by design a bankruptcy risk.